Part 4/14:
Most discussions frame the 2008 crisis as a financial crisis, triggered by excesses in specific asset markets like housing or tech stocks. While asset bubbles and speculative behaviors were visible symptoms, they were merely surface-level manifestations of a deeper, systemic issue: a monetary crisis.
Financial Crisis:
Originates from asset bubbles—overvalued stocks, real estate, or credit.
Pathology involves risky behaviors, inflated valuations, and eventual corrections.
Usually results in direct asset devaluations, leading to some economic pain and losses.
Monetary Crisis:
Involves the collapse of the money flow and liquidity in the entire system.
Money, which should act as the facilitator of economic activity, dries up.